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Optimal pricing of depletable, replaceable resources: the case of landfill tipping fees

Optimal pricing of depletable, replaceable resources: the case of landfill tipping fees

Journal of environmental economics and management 28(3): 307-323

ISSN/ISBN: 0095-0696

DOI: 10.1006/jeem.1995.1020

We develop a general model for pricing a depletable, replaceable asset, and discuss its application in determining optimal tipping fees for a sanitary landfill. We show that the optimal fee includes a component that grows at the real interest rate as space in the landfill is depleted, and then drops when a new landfill is built. Because the scarcity cost of landfill space increases as the landfill is filled, it may be optimal to delay a waste reduction program (such as recycling, composting, or incineration) until the landfill is partially full.

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Accession: 013167920

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